Tesco ups FY guidance as market share rises

Tesco has raised its full-year profit outlook after reporting strong sales across the business in its half-year results, which have seen it increase its market share over the period.Group sales, excluding VAT and fuel, rose by 5.1% to £33.1bn. The supermarket also saw adjusted operating profit hit £1.67bn for the six months to 24 August, up by 1.6% at constant exchange rates. 

In the UK and Ireland, adjusted operating profit rose by 2.1% to £1.47bn. Booker, its wholesale division, delivered an uptick of 0.6% to £162m, while central Europe profits fell by 11.2% to £44m due to price investments and lower rental income.

In light of its overall strong performance, the company now expects full-year adjusted operating profits of between £2.9bn and £3.1bn, higher than the previous range of £2.7bn to £3bn. 

It comes as the group’s UK market share rose by 77bps to 28.4%, having gained share for 28 consecutive four-week periods. In the Republic of Ireland, its share was up 11bps at 23.7%, consolidating three years of “consistent” market share gains.

In its latest update, Tesco said it had noted an “increase in the competitive intensity of the UK market” in April, and provided guidance that meant it could take “decisive” action and invest across the business. 

While this competitive intensity “remains elevated”, a “better-than-expected” customer response to this investment in the first half, alongside good weather over the summer, helped the group offset the investment costs.

It added it is making good progress towards the £500m Save to Invest target, helping to mitigate the impact of increased cost inflation. The group also said its sales were in part driven by its Aldi Price Match, Low Everyday Prices on around 1,000 lines and 10,000 Clubcard Prices deals each week. According to Tesco, Clubcard Prices have saved its customers up to £375 off their annual grocery bill.

The half-year period also saw UK online sales rise by 11.4%, driven by growth in orders per week, with market share up 112bps to 36.9%. ROI online sales were up by 18.8%, supported by the launch of same day delivery last year.

Meanwhile, Tesco Whoosh rapid delivery service sales rocketed 59%, with further growth in active customers and basket sizes, with the service now covering over 70% of UK households.

Over the period, more than 470 new products launched and a further 560 products improved across Tesco’s own-brand ranges, while its Finest range sales soared by 16%, with over 300 new products introduced. 

CEO Ken Murphy said: “”I am pleased with our first half performance, which builds on already strong momentum. Our market share gains in the UK are a particular highlight and reflect the decisive action we took at the start of the year to further invest in value, quality and service. The extension of our savings programme is helping offset new operating cost inflation, including increased National Insurance and other regulatory costs. Sales have grown across all our businesses, with customer satisfaction scores improving once again.

“We are also continuing to invest in our long-term growth, leveraging technology to drive more personalised engagement through Clubcard and deeper retail media reach across channels and suppliers. Our online business is going from strength-to-strength, enhanced by the recent launch of F&F online and continued growth in Whoosh, our rapid delivery service.”

He added: “Competitive intensity remains high, and with continued pressure on household budgets, we remain committed to ensuring customers get the best possible value by shopping at Tesco. As we continue to invest, we are creating sustainable value for all our stakeholders. Our colleagues are central to everything we do, and I would like to thank them all for the role they have each played in delivering for our customers.”